HDFC Ltd was India’s first big housing finance company, started in 1977. Interestingly, ICICI (which later became ICICI Bank) helped set up HDFC in the beginning. Years ago, before the merger of HDFC Ltd HDFC Bank, Deepak Parekh, HDFC Bank former chairman, recalled that Chanda Kochhar (then head of ICICI Bank) once offered to merge HDFC with ICICI Bank.
While speaking on Chanda Kochhar’s YouTube channel, Deepak Parekh shared that she once said something like, “ICICI helped start HDFC—why don’t you come back home?” Parekh declined the offer, explaining that it didn’t feel right because HDFC had created its own identity and strong brand over the years.
In July 2023, HDFC merged with HDFC Bank, which was actually its own banking arm. This was a reverse merger—normally, the parent company takes over the smaller one, but here, the bank took over its parent. After the merger, HDFC Bank became the largest private bank in India.
Why HDFC Ltd merged with HDFC Bank?
This merger happened mainly because of pressure from the Reserve Bank of India (RBI). Back then the RBI started treating large NBFCs almost like a bank, even though it wasn’t one. Since HDFC Ltd had grown into a very large financial company with assets exceeding ₹5 lakh crore, the Reserve Bank of India (RBI) began treating it like a bank due to its size and significance.
The RBI wants big finance companies like HDFC to follow the same strict rules as banks. That’s because if such a large company were to fail, it could cause serious problems for the whole financial system. So, to avoid future complications and follow RBI rules more easily, HDFC Ltd merged with its own bank—HDFC Bank. This made things simpler and more streamlined.
Deepak Parekh revealed that the RBI supported the merger but didn’t give any special help or extra time to make it happen. He said the merger was both a sad and a happy moment. It was sad because HDFC Ltd, a well-respected company that had been independent for 44 years, would no longer exist on its own.
But it was also happy because the merger created a much stronger and bigger HDFC Bank—one that could compete with large banks around the world, including big Chinese banks. This is a positive step for India’s economy.
Deepak Parekh believes that India needs bigger and stronger banks. To do that, banks in India should join together through mergers and acquisitions — just like companies do when they want to grow faster and become more competitive. He gave the example of the HDFC and HDFC Bank merger. Even though it meant the end of HDFC Ltd as a separate company (after 44 years), it helped create a much larger and more powerful bank.
HDFC now new and bigger bank is better prepared to help India’s economy and compete with big banks around the world. So while it was emotional to see HDFC Ltd disappear, it was the right move for the future of India’s financial system.